Sunday, November 06, 2005

The shake-up at Warner Bros.

Warner Brothers Entertainment, though still profitable, just announced a lay-off of 6 percent of their staff of 4500 employees. Why would a company making money do something like that? Only if they doubt that the future will be brighter than the present.

Laura Holson's story in today's NY Times is an in-depth exploration of what's happening at Warner Brothers. They're trying to get stars like Brad Pitt to work for less money up front, and more on the back end. They're also trying to figure out how to spend more intelligently on marketing - and make every nickel work for them.

But WB is also making some worrisome moves. Jeff Robinov, the head of production, rightly observes that too many new releases feel similar to other movies. But he says that Warners is considering making fewer movies each year (one or two less than the 25 they've been making annually). I understand where they're coming from with this strategy - leverage the power of the studio to make fewer big-budget movies, and market them in a loud, unavoidable way. I just think they're wrong, that the future is about making more movies that take bigger chances, and create new characters and stories, rather than milking established franchises. The more expensive a film, and the more heavily a studio's financial results rest on an individual release, the less likely that movie is to be fresh or original. ("Miss Congeniality 2," anyone?)

Finally, Barry Meyer, the CEO of Warner Brothers, seems to be taking a wait-and-see posture about new delivery platforms like the video iPod. Holson writes:

...Warner, unlike Disney, is still skeptical about offering its movies and television shows for the video iPod or other portable devices. One concern is that the content will be easier to copy and share, compounding the problems the studio is already experiencing with piracy.

"I don't know if we are ready to do that," Mr. Meyer said. "I want to see how the Disney experiment works, how it affects the television affiliates and video retailers. A lot of people are affected by it. We want to be responsive, but everything has the overlay that we don't want to put anything out that has a negative effect on how we manage our digital rights."

Cutting costs can make a lot of sense. But only if it's accompanied by a strategy for innovation and growth. What happened to the risk-taking Warner Brothers of old?

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